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Early on Thursday bitcoin surged to a record high in terms of its valuation in Japanese yen, outpacing its valuations in other leading fiat currencies such as U.S. dollars, euros, British pounds and Australian dollars. Currency devaluationThis increase in yen valuation can be attributed to the recent depreciation of the Japanese currency against the backdrop of continued money printing by the Bank of Japan (BoJ) and resurging inflation, which have collectively weakened sentiment surrounding the yen. Fiat currencies, including the Japanese yen, lack backing by hard assets and derive their value solely from market perceptions. The current rally of bitcoin is indicative of the prevailing market sentiments, with the yen exhibiting particular vulnerability among major fiat currencies. For instance, early market activity on Thursday witnessed bitcoin, often hailed by proponents as digital gold, hitting a fresh all-time high of 7.9 million yen on Tokyo-based cryptocurrency exchange bitFLYER. In contrast, the cryptocurrency's dollar-denominated price hovered above $52,000, still 32% below its peak of $69,000 in November 2021. This price disparity underscores the strain on the Japanese yen, fueled by the Bank of Japan's persistent liquidity easing measures, rising inflationary pressures and indications of economic fragility.Photo by jun rong loo on UnsplashEntering recessionThis recent surge coincides with reports confirming Japan's descent into an economic recession by the end of the previous year, slipping to fourth place behind Germany in terms of the world’s largest economies. While central banks worldwide, including the Federal Reserve, aggressively raised interest rates in attempts to curb inflation, the Bank of Japan maintained near-zero interest rates and continued printing fiat currency. A recession characterized by inflation without corresponding growth prompts investors to seek refuge in safer havens like gold and digital gold. With that, there could be further opportunities for bitcoin to make further in-roads in Japan. In 2023, Japan's core inflation, excluding volatile food and energy components from the consumer price index (CPI), rose by 3.1%, marking its most significant increase since 1982. Consequently, the yen depreciated to a 33-year low against the dollar, declining by 13% and 7.5% against the dollar previously, with an additional 6.4% decrease this year. Bitcoin's persistent premium in Japanese yen terms suggests that it may continue to maintain higher valuations unless the Bank of Japan accelerates its exit from the ultra-loose monetary policy it has been pursuing. That would make yen holdings relatively more attractive compared to other assets. Although a complete regulatory framework for digital assets in Japan is still lacking, the country has recently moved to make tax rules more crypto-friendly. Bitcoin's elevated valuation against the Japanese yen underscores the challenges facing Japan's fiat currency, driven by monetary policy decisions and economic uncertainties.

News emanating from the Central Asian republics of Kyrgyzstan and Kazakhstan in recent days points to further rollout and development of cryptocurrency sector infrastructure. A press release published on March 26 outlined that Kyrgyzstan is working on various initiatives in order to copper-fasten its position as a regional crypto hub. Those efforts include the advancement of digital asset regulation, enabling the launch of licensed crypto platforms and ongoing trials of legal frameworks relative to crypto. Photo by Steve Johnson on UnsplashA7A5 stablecoinOne initiative that may aid in the development of the digital assets sector in Kyrgyzstan is the rollout of the A7A5 stablecoin. A7A5 is pegged to the Russian ruble, with the token having been issued by Kyrgyz company Old Vector. The product was first launched in February, with the intention for it to be used on the A7 cross-border payment platform of Russian state-owned bank Promsvyazbank. Garantex, a Russian crypto exchange which had been sanctioned by U.S. and European authorities and was recently shut down, announced on Feb. 19 the listing of the A7A5 stablecoin. The stablecoin’s backers claim that it was issued “in complete accordance with the new national legislation - under the control of regulatory authorities and directed to an officially registered, regulated broker.” The stablecoin is being promoted on the basis of an annual yield of up to 20%, which has been established due to its link to the refinancing rate of the central bank of the Russian Federation. Kazakhstan crypto bank proposalMeanwhile, lawmakers in Central Asian neighbor Kazakhstan have proposed the creation of a national crypto bank. According to The Times of Central Asia, an English-language daily newspaper, Azat Peruashev, leader of the Ak Zhol political party within Kazakhstan’s lower house of parliament, put forward the proposal, which would implicate the involvement of the National Bank of Kazakhstan and a number of the country’s commercial banks. Peruashev addressed the proposal to Kazakhstani Prime Minister Olzhas Bektenov. However, the Central Asian country may have some fundamental issues to address before a crypto bank can become a reality. Currently, Kazakhstan has yet to establish a legal framework for the use of digital assets.  Last year, the authorities shut down 36 cryptocurrency exchanges which were deemed to have been operating illegally. In total, 3,500 illegal crypto exchanges have been shut down in Kazakhstan. Leading American crypto exchange business Coinbase faced a setback in the Central Asian country in November 2023 when the government cut access to its website within the country. While these crypto businesses have struggled to operate in Kazakhstan, Binance Kazakhstan successfully obtained a trading license from the Astana Financial Services Authority (AFSA) in September of last year. Earlier this month, the company added options trading and futures copy trading to the platform. Blockchain industry pioneer Kyle Chasse took to X to report on this most recent development. He suggested that given that 90% of crypto activity in Kazakhstan is off the books, the authorities are interested in launching a crypto bank so as to bring it all under their control. 

Japanese cabinet approves crypto tax reformThe Japanese government has green-lit an amendment to its fiscal 2024 tax reform plan, specifically targeting the taxation of companies holding third-party-issued cryptocurrencies.Photo by Louie Martinez on UnsplashIntroducing tax exemptionAccording to local news sources, this amendment brings about a crucial change by exempting such companies from the year-end mark-to-market valuation tax.The Fiscal Year 2024 Tax Reform Outline, now approved by the Japanese cabinet, marks a departure from the previous tax regime. Under the new framework, companies holding crypto assets will no longer be subjected to mark-to-market valuation at the end of the fiscal year. Instead, they will be taxed solely on the actual profits realized from the sale of virtual currencies and tokens.Alleviating the tax burdenThe primary motivation behind this amendment is to alleviate the tax burden on corporations engaged in the holding and operation of crypto assets. Previously, corporations holding third-party-issued cryptocurrencies were required to record profits or losses based on the difference between market value and book value at the end of the fiscal year. The new reform, however, exempts assets assumed to be held continuously from this mark-to-market valuation.News of moves to implement such reform emerged at the beginning of December. At the time, a report by Nikkei Asia suggested that Japanese lawmakers were working towards addressing issues related to crypto taxation. Japanese regulator, the Financial Services Agency (FSA) had first proposed such changes to the tax code via a 16-page submission on Aug. 31.Signaling investor-friendly approachThis policy shift aligns the taxation of companies with the tax system applicable to individual investors, signaling a more investor-friendly approach. Lawmakers from the Liberal Democratic Party and their coalition partner Komeito had reportedly considered a proposal to exempt corporations from taxes on unrealized crypto gains. This move is seen as Japan’s effort to boost liquidity in the market, putting it in line with other Asian regions striving to become prominent centers of crypto activity.The amendment, influenced by the Japan Cryptoasset Business Association’s (JCBA) call for tax reform, is anticipated to stimulate the growth of local startup businesses utilizing blockchain technology and attract international projects to the Japanese market.The proposal is set to be presented at the regular session of the National Diet (Japan’s national legislature) in January of the upcoming year, where it will require approval from both the House of Representatives and the House of Councilors.Notably, the Fiscal Year 2024 Tax Reform Outline encompasses a broader spectrum of economic policies, including a plan to reduce income tax and resident tax by 40,000 yen per person from June 2024 onwards.News of the crypto tax reform has been well-received by most industry commentators and market participants. Daiki Moriyama, Director of Singapore-based gaming blockchain project Oasys, reacted positively to the development. He told The Block:“The fact that the Japanese government has demonstrated its willingness to grow Web3 business by enacting tax reform for the second year in a row is extremely important to all Web3 business stakeholders around the world.”